A bunch of very important American companies are cutting ties with Huawei on Monday after the Commerce Department added the Chinese telecom giant to its restriction list late last week. Implications: 1) U.S. companies restricted from selling to Huawei unless specifically granted a license (waiver) 2) RETALIATION (a lock) 3) supply heads south...demand heads south, and uncertainty.
This can and will have serious consequences for Huawei, the U.S.-China trade talks and much more.
As of Monday morning, some of Huawei's biggest suppliers such as Intel, Qualcomm, Xilinx and Broadcom said they would not supply Huawei until further notice, while Google cut off the supply of hardware and some software services to Huawei smartphones.
Huawei bonds have been hitting the skids on this news. All these stocks are hitting the skids.
We continue to hear that the U.S. and President Trump have the upper hand in trade talks. If it wasn't clear that the president was ready to use Huawei as a "chip" in the trade talks, it should now be. But anyone who thinks that China will take this sitting on its rear end has probably been betting the Mets every day.
The problem for Huawei is that it is heavily dependent on U.S. semiconductor products and one has to ask the question on whether they can find supplies elsewhere.
It looks like the "trade issue" no longer has Huawei as a separate issue. If the president wanted Huawei as part of the negotiations, he now has it … but at what cost?
Technology stocks are again bludgeoned this morning. Technology leads the markets both up and down. For a president who watches every tick in the market, I am not so sure he is going to be thrilled with this latest reaction. We suspect we are going to see a decent amount of technology warnings based on one sentence: "Trade and Huawei!"
We think tariffs suck, but we do understand China was the side that backed away recently from things they had agreed to in negotiations. We only care about outcome and unfortunately, we are not so sure the president understands that this "trade issue" is just starting to heat up -- and we suspect markets will not be too friendly to it.
Gary Kaltbaum is a registered investment adviser with more than 30 years of experience in the markets. He is owner and president of Kaltbaum Capital Management, a financial investment advisory firm headquartered in Orlando, Florida. He is a Fox News Channel Business Contributor regularly appearing on Fox News Channel and the Fox Business Network. Gary is the author of the book “The Investors Edge” and is also the host of a nationally syndicated radio show with the same title “Investors Edge,” which is broadcast on numerous stations across the U.S.